Loans For School: Avoiding The Bad Choices

Loans For School: Avoiding The Bad Choices

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If you recently won the Lottery or got really lucky in Las Vegas, this article is not for you. Most students, though, come to realize that they need to find good loans for school to pay the tuition fees and expenses that were not covered by savings, grants or scholarships.

In a moment we'll discuss a few pretty good choices among available loans for school. But first let's throw out some really bad choices that many students have made.

Some Poor Choices

First, something we all seem to both love and hate: credit cards. True, they are quick and convenient. Also they can help you out in a pinch. Realistically, you have to have them to function in our society. Try renting a car or making an online purchase without one! But seriously, for financing your tuition? Only consider them if you have a rock-solid plan to pay them back. Otherwise, credit cards can destroy you with oppressive interest rates, late fees and over limit penalties.

Another awful source of funds is check cashing stores. When you look at the annualized interest rates they are charging, it will take your breath away! Seriously, if you use these often enough you may never recover. Look, if you don't have the money right now, what makes you think you'll have it in 2 weeks? Avoid these places!

What about gambling? There are so many cool games: cards, roulette, one-armed bandits, dice, horse/dog races, and of course the lottery. The fact is, gambling is very profitable if you're a casino owner. For you, though, gambling is just a really bad habit to get into. Don't count on it to pay your tuition.

Then there are title loans, where you sign over the title to your car as collateral for the loan. Typically, you will only get a fraction of the car's value, and the interest rate is quite high. Many borrowers then find they are unable to repay the loan, and lose their car. If you are willing to give up your car for much less than its value, why not just sell the car and bank all the cash? At least you'll earn some interest instead of paying it.

Some Better Choices

Once you have exhausted your possibilities for getting scholarships or grants, you'll need to uncover the student loans you'll need to cover all the rest of your expenses. So let's have a look at some of the more consumer-friendly types of loans for school.

We can place these into two categories: private student loans and government guaranteed loans. Private loans are funded by banks and other institutions. Each lender has their own rules, and usually these carry higher interest rates than the government loans. In many cases you will need a cosigner, and/or a high credit score to qualify for a private loan.

Government guaranteed loans for school usually offer lower rates, longer payback schedules, and the option to consolidate loans after completion of college. A consolidation loan could lower the overall interest rate as well.

Among the government loans are three categories: Perkins loans, Stafford loans, and Grad-PLUS loans. Grad-PLUS is short for Graduate student and Parent Loans for Undergraduate Students.

These three have some various rules, but also share several similarities. At ExploreStudentLoans.com we discuss each of these loans in greater detail. One important requirement that they share, though: you must show a need for the money in order to qualify for the loan program. For all of these, you will need to submit a FAFSA (Free Application for Federal Student Aid) form to verify your qualifications.

Should You Get a Scholarship or a Student Loan?

Sorry- that was a trick question. The correct answer is, if possible, get both. A scholarship or grant is far better than a loan. You just might be surprised at how much you can get in grant money that you'll never have to repay. Loans for school can fill in the gaps when you can't get enough of the free money. Try to keep student loans to a minimum, though, and pay them off as quickly as possible to minimize your interest costs.

And finally, be cautious about using loans for school if your chosen career will begin at a relatively low pay grade. If that is the case, you may want to consider working part time to "pay as you go" for your expenses. Many students have graduated with a debt load that proved to be a heavy burden to carry for years. If you practice frugality now, you'll thank yourself for it later.

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Credit not so good? Get help here: Student Loans For Bad Credit

For more tips on finding the best student loans, visit http://ExploreStudentLoans.com



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